How to Calculate Freelance Rates
Last updated 2026-09-12
A freelance hourly rate needs to cover more than take-home pay — it has to account for unbillable hours, business expenses, and taxes that an employer would otherwise absorb.
Set your target annual income
Start with the salary you'd want to take home, then add estimated self-employment taxes and business expenses (software, insurance, equipment) on top.
Estimate your billable hours
Subtract time for admin, marketing, unpaid pitches, vacation, and sick days from your total working hours — most freelancers can only bill 50-70% of their working time.
Divide income by billable hours
Hourly rate = (Target income + expenses) ÷ billable hours per year. This gives the minimum rate needed to hit your target, before adding profit margin.
Example
Target income $70,000 + $10,000 expenses = $80,000. At 1,200 billable hours per year (about 23/week), the rate is $80,000 ÷ 1,200 ≈ $66.67/hour.
Important Considerations
- Billable hours are almost always lower than total working hours — budgeting as if 100% of your time is billable is the most common freelance pricing mistake.
- Revisit your rate at least annually, and whenever your expenses, tax situation, or target income changes.
- Project-based or value-based pricing can outperform hourly rates for well-scoped work, but the hourly calculation is still a useful floor to price against.
Frequently Asked Questions
- Why is my freelance rate so much higher than an equivalent salary divided by hours?
- A salaried employee's pay only needs to cover their working hours, with the employer absorbing taxes, benefits, and non-billable time — a freelancer's rate has to cover all of that themselves.
- How many hours a year should I count as billable?
- A common starting estimate is 50-70% of total working hours, since admin, marketing, and unpaid time realistically eat into any freelancer's schedule — track your own actual ratio over a few months for accuracy.